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Markets muted despite earlier China volatility

Friday - 8/16/2013, 12:03pm  ET

A man walks by an electronic stock board of a securities firm in Tokyo, Friday, Aug. 16, 2013. Expectations that the U.S. Federal Reserve will start to phase out its monetary stimulus had a mostly negative impact on Asian stock markets Friday. (AP Photo/Itsuo Inouye)

PAN PYLAS
AP Business Writer

LONDON (AP) -- Financial markets were ending the week on a subdued tone Friday, as expectations grew that the Federal Reserve will soon start to reduce its monetary stimulus.

Chinese shares, by contrast, had a hugely volatile day after a trading frenzy that was blamed on one brokerage's mistaken computerized orders.

Despite the uncertainty in Shanghai, the main focus in the markets remains the Fed, and when it will start tapering its stimulus. Investors think the Fed is likely to start next month, a view that was reinforced Thursday by a fall in U.S. weekly jobless claims to a near six-year low of 320,000.

The claims figures reinforced views that the economy is strong enough to withstand less support from the Fed. The central bank is currently buying $85 billion of financial assets each month in an effort to lower interest rates to spur borrowing and economic growth.

The latest housing figures out of the U.S. on Friday did little to alter the prevailing view in markets. Housing starts were up 5.9 percent in July to an annualized 896,000 units. Though that was slightly less than anticipated, June's decline was revised up.

Trading volumes remained low, as is often the case at this time of the year.

"In reality, it is proving especially difficult to analyze the impact of tapering fears as there are only a few traders actually left in the markets," said Shavaz Dhalla, a financial trader at Spreadex.

In Europe, Britain's FTSE 100 rose 0.3 percent to close at 6,499.99 while Germany's DAX rose 0.2 percent to 8,391.94. The CAC-40 in France gained 0.8 percent to 4,123.89.

In the U.S., the Dow Jones industrial average was up less than 0.1 percent at 15,115.07 while the broader S&P 500 index was flat at 1,661.70.

Earlier, most Asian stock markets tracked Thursday's pullback in Europe and the U.S. Japan's Nikkei 225 index fell 0.8 percent to close at 13,650.11 while Hong Kong's Hang Seng shed 0.1 percent to 22,517.81. South Korea's Kospi declined 0.2 percent to 1,920.11.

The main point of interest during the Asian session was Shanghai, where volumes soared to 54 percent above Thursday's level, with 1.5 billion shares changing hands. The main market index jumped 6.5 percent before ending the day down 0.6 percent.

A brokerage, Everbright Securities, said in a statement it suffered an unspecified problem with a computerized trading system. Everbright's computers sent 7 billion "wrong instructions" to purchase shares, according to the state-run China News Service.

Everbright asked to have its trades canceled, CNS said. The exchange, however, said on its website that transactions already closed would be cleared normally.

Elsewhere, trading was fairly muted. In the currency markets, the euro was down 0.2 percent at $1.3325 while the dollar rose 0.2 percent to 97.55 yen.

And the benchmark New York contract for crude oil was 67 cents higher at $108 a barrel. Oil traders are focused on developments in Egypt amid fears of a potential supply disruption. Egypt is not a major oil exporter, but traders worry that violence there could spill over to more important oil-exporting countries or disrupt the Suez Canal, a major trade route.

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Pamela Sampson in Bangkok contributed to this report.


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